CCPA - Union Card - A Ticket Into Middle Class Stability

RESEARCHwww.policyalternatives.ca ANALYSIS SOLUTIONS

The Union Card A Ticket Into Middle Class Stability

Hugh Mackenzie and Richard Shillington

Canadian Centre for Policy AlternativesMay 2015

About the Authors

Hugh Mackenzie is a Research Associate of the Ca-nadian Centre for Policy Alternatives and part of the research team of the CCPA Inequality Project. He has written reports and backgrounders for the CCPA on a wide range of issues including his April 2009 CCPA analysis of the benefits from public services in Canada, “Canada’s Quiet Bargain.” He conceived and writes the CCPA’s annual review of executive compensation in Canada. He is princi-pal in Hugh Mackenzie & Associates, which pro-vides economic consulting services to the trade union movement and the not-for-profit sector. He has written extensively on a wide range of budget-ary issues in Ontario, including tax and fiscal pol-icy, elementary and secondary education finance and postsecondary education finance. From 1991 to 1994, he was Executive Director of the Ontario Fair Tax Commission.

Richard Shillington has post-graduate degrees in statistics from the University of Waterloo. He has been engaged in the quantitative analysis of health, social and economic policy for the past 30 years. His research has covered several policy fields; health manpower planning, program evalu-ation, income security, poverty, tax policy and hu-man rights. He has worked for several provincial and federal departments as well as commissions studying the economy, unemployment insurance, human rights and tax policy.

He appears regularly before committees of the House of Commons and the Senate. He also pro-vides commentaries regularly for television, ra-dio and newspapers on issues of taxation, human rights and social policy.

Acknowledgements

Garry Sran, Andrew Jackson, Armine Yalnizyan, David MacDonald and Bruce Campbell offered helpful comments on earlier drafts of this study.

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1 Executive Summary

5 Introduction

7 The Squeeze On the Middle Class

9 Unions and the Middle Class

11 Union Representation and the Distribution of

Income: Aggregate Data for Individuals

16 Aggregate Data for Economic Families

19 Union Representation and Economic Families, Private-Sector Employees

21 Union Representation and Economic Mobility

25 Recessions, Union Satus, and Income Changes

31 Conclusion

33 Note On Data Sources

35 Notes

The Union Card: A Ticket Into Middle Class Stability 1

Executive Summary

In a year where middle class economics is taking political root in the U.S.

and Canada, it’s important to get clear about what’s driving the strain on

Canada’s middle class and what can be done about it.

What we know about Canada’s middle class is that it arose from the

ruins of the Great Depression and the Second World War, growing stead-

ily between 1945 and the late-1970s. We know from previous studies that

the growth of the middle class happened in sync with the rise of unionized

workers in Canada.

But since the late-1970s and early-1980s, these income trends have re-

versed, contributing to a widening income gap and a squeezed middle class.

The data show that recent income inequality growth has been driven by con-

centrated income gains for the richest Canadians. But where is the squeeze

on the middle class coming from?

This report examines 30 years of unionization and income data, thin

slicing unionized workers along the income spectrum by deciles (slices of

10%) to examine the impact of union decline on the mobility of Canada’s

middle class. The resulting findings contribute a new addition to our under-

standing of middle class economics: it reveals that unionization is not just

about a wage premium — it affects workers’ location along the middle spec-

trum of the income ladder.

The study shows that while only 27 per cent of full-time Canadian work-

ers were represented by a union in 2011 (the most recent year of available

data), the majority of those workers reside in Canada’s middle class. In the

2 Canadian Centre for Policy Alternatives

lowest income decile, for instance, only eight per cent of workers were repre-

sented by a union, whereas in the eighth income decile, over 50 per cent

were represented by a union.

By examining where unionized workers stand along the income spec-

trum, this study is able to show that while union density in Canada declined

only slightly between 1997 and 2011 — dropping from 29 per cent to 27 per

cent — that decline disproportionately impacted workers in the upper half

of the middle class. Union representation actually increased slightly in the

bottom half of Canada’s income spectrum over that time frame.

By drilling deeper into private versus public sector workers who were

represented by a union between 1997 and 2011, this study shows that a drop

in private sector unionization had a big impact on workers’ ability to stay in

the upper income deciles. Overall, private sector union density in Canada

dropped from 21% to 14% between 1997 and 2011, a significant drop. A more

detailed look at the data shows that, overwhelmingly, the decline in union

density took place in the upper half of the income distribution.

FIgure 6 Proportion of Private Sector Workers Represented by a Union, by Income Decile, 1997 and 2011

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%Lo

wes

t

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

Aver

age

20111997

Source Statistics Canada, SLID, 1997 and 2011. Income deciles are defined by the income distribution of all full-time employees. The bars show the percentage of private sector em-ployees in each decile who were represented by a union. For example, it shows that union density among private sector workers in the 7th income decile dropped from 31% in 1997 to 19% in 2011.


The report shows that a similar pattern emerges for the role of union

representation in the economic well-being of families:

•Economic families with one or more full-time unionized workers are

more likely to find themselves in the middle and upper-middle part

of the income spectrum.

•These families are 1.75 times as likely to have incomes at the upper end

of the income scale — in deciles 5 through 9 — than at the lower end.

However, the decline in union density between 1997 and 2011 is reflected

in these data as well. The share of families with at least one union member

went down between 1997 and 2011, and that decline was concentrated in the

upper-middle family income range. Comparing data from 1997 and 2011, the

report shows that most of the decline in the share of unionized families took

place at the higher end of the income spectrum: In 2011, 47% of families in

deciles 5 through 9 included at least one union member; 14 years earlier, in

1997, 56% of families in deciles 5 through 9 had at least one union member.

In other words, the hollowing out of Canada’s middle class, particular-

ly its upper middle class is closely associated with the decline of unioniza-

tion in Canada — especially in the private sector.

To get closer to a view of the underlying causes of this association be-

tween unionization and the middle class, the study looked at data on indi-

vidual Canadians in Statistics Canada’s Longitudinal Administrative Data-

bank. Using these data, the study investigates the relationship between

unionization and income for individuals during the last two significant re-

cessions in Canada — 1989 to 1994 and 2006 to 2011, covering the period be-

fore and after the Great Recession of 2008–09. The findings are astounding:

•In each recessionary period, workers who entered the recession

with union representation and ended the recession without union

representation lost income and dropped down the income ladder,

a significant proportion by two deciles or more. For example, in the

2006 to 2011 period, 39% of those who lost union jobs dropped two

deciles or more in the income distribution; median incomes in this

group dropped by 9%.

•Those who gained union representation in the course of each reces-

sionary period moved up the income ladder, often by two deciles

or more. For example, in the 2006 to 2011 period, 35% of those who


gained union representation moved up two deciles or more in the in-

come distribution; median incomes in this group increased by 39%.

The findings suggest that there is a huge opportunity cost for workers who

lose a unionized position, especially during recessionary periods. Converse-

ly, workers represented by a union tend to have greater mobility up the in-

come ladder and are better positioned to weather an economic storm such

as recession.

The findings reveal a new, previously unexamined dimension of the in-

tricate relationship between a healthy labour movement and a healthy mid-

dle class in Canada. A union card is not only a ticket into Canada’s middle

class, it’s the key to upward mobility within the middle and upper class. It’s

also insurance against tough economic times, ie, stability.

The report concludes that the widely discussed squeeze on the middle

class in Canada is intertwined with the dramatic decline in union represen-

tation. Because union density has been in steady decline in the private sec-

tor, individuals losing union representation and experiencing income losses

will inevitably outnumber those gaining union representation and experien-

cing income gains. This, in turn, suggests that the change in union density

in the private sector over the past 30 years is an important driver of grow-

ing income polarization and inequality.

In other words: we can expect the middle class to shrink, and upward

mobility to stall, as long as union representation continues to decline. Any

policy discussion around middle class economics would rightly examine

these startling trends and reconsider ways to facilitate the rise of collective

bargaining in Canada’s future. The health of the middle class depends on it.


Introduction

Income InequalIty In Canada has gone through two notable shifts since

the end of the Second World War.

In the first shift, from the post-war 1940s until the late-1970s and early-

1980s, the gap between the rich and everyone else narrowed. As the econ-

omy grew during this period, instead of concentrating the fruits of Canadian

labour into the hands of the few, the gains of that economic growth were

more evenly shared among all workers.

The income share of the richest 5% of Canadians dropped from 24.6% in

1945 to 22.1% in 1979, continuing a trend that had begun in the late-1930s,

when the income share of the richest 5% in 1938 was 39.6%. The income

share of the richest 1% of Canadians dropped from 10.1% in 1945 to 7.7% in

1979 and further to 7.1% in 1982, continuing another trend which had begun

in the late-1930s (the richest 1% income share in 1938 was 18.4%).1

Between 1945 and the late-1970s, when Canada was busy growing its

middle class, real average weekly earnings of working Canadians more than

doubled, increasing by 114% (after inflation).2 In 1947, wages and salaries

accounted for 47% of national income. Thirty years later, in 1977, they had

increased to 55%.3

Since the late-1970s and early-1980s, all of these trends have been re-

versed, contributing to worsening income inequality. The average of week-

ly wages and salaries in Canada actually declined by 0.3% between 1977

and 2013 (adjusting for inflation).4 Since it peaked at 55% in 1977, the share

of wages and salaries in national income has declined to 51%, roughly the


same as it was in 1945.5 The income share of the richest 1% of Canadians

increased from 7.1% in 1982 to 12.1% in 2011 — higher than it was in 1945.6

In the second shift, between the early-1990s and today, the worsening

of income inequality in Canada has coincided with a period of stagnation

in median real incomes. Incomes rose at the top of the income distribution,

but not in the middle or below.

Here’s what happened to incomes in Canada between 1991 and 2011:

•The richest 10% accrued 48% of all inflation-adjusted income growth

in the country.

•The richest 5% accrued 35% of all income growth.

•The richest 1% accrued 18% of total growth.

•The bottom 50% of the distribution got 7%.7

Clearly, something has happened to the relative economic power of the mid-

dle class and the rich during this second phase.

The data shows that recent income inequality growth has been driven

by concentrated income gains for the richest Canadians. But what explains

the middle class squeeze? The next section examines this question.


The Squeeze On the Middle Class

WhIle globalIzatIon and technological advancements are frequent-

ly offered up as explanations for worsening income inequality in Canada,

there are five notable domestic trends influencing the squeeze on the mid-

dle class and the working class:

1. Legislated employment standards are failing to keep pace with chan-

ges in the structure of the Canadian labour market;

2. Government policy changes, like the gutting of Employment Insur-

ance and the extension of the temporary foreign worker program,

are lowering the floor for workers’ living standards;

3. Spending cuts on public services, combined with curbing public

sector employment growth, is stagnating what was once a source of

stable, relatively well-paid employment;

4. More than two decades of tax cuts, which have been focused on in-

come from capital and high personal incomes, are constricting pub-

lic supports that help the middle and working classes; and

5. Union density in Canada, particularly among Canadians employed

in the private sector, is steadily declining.


This final trend is worth deeper examination. Several recent studies have

focused on the relationship between unionization and income inequality

in Canada.8 In general, these studies find that workers in a position to bar-

gain collectively for their wages and working conditions are able to negoti-

ate earnings 5–10% higher than those of other workers. In industries where

union density is relatively high, studies show that all workers benefit — even

those who aren’t unionized — because employers in that industry are forced

to compete with union wages and working conditions. In other words, the

presence of a strong labour movement is a force for improving living stan-

dards for all workers.

Looking at the generally accepted aggregate measure of income in-

equality, the Gini coefficient, along with union density, the Canadian data

tell a story about the “arc of inequality” and unionization over time. Figure

1 shows income inequality growing as union density declines — particular-

ly in the mid-1990s.9

This paper investigates this relationship from a different perspective than

previous studies. It starts with an examination of the distribution of income

at both the individual and economic family level, looking at the union/non-

union split in each income decile.

FIgure 1 Union Coverage and Gini Coefficient in Canada, 1980–2010

0.30

0.32

0.34

0.36

0.38

0.40

0.42

0.4419

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

200

0

200

2

200

4

200

6

200

8

2010

Gini Coefficient

Uni

on C

over

age

(%)

GIN

I Co

effici

ent (

rang

e 0

-1.0

0)

30%

32%

34%

36%

38%

40%

42%

44%

Union Coverage

Source Gini Coefficient - CANSIM Series v21151657 Canada; After-Tax income; All family units. The Gini Coefficent data has been multiplied by 100. Union Coverage - Visser, J. Institu-tional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts database (ICTWSS) www.uva-aias.net/208. 1984 and 1988 data are reported by Andrew Jack-son (2004), p. 135. 2010 data from Statistics Canada Table 282-0078.


Unions and the Middle Class

thIs sectIon examInes union representation by individual income decile

between 1997 and 2011 and the presence of union families (families with at

least one union member) by family income decile using data from the Sur-

vey of Labour Income Dynamics (slId) database.

Using Statistics Canada’s Longitudinal Administrative Databank (lad),

it also analyzes the impact of changes in union representation on individ-

uals’ relative positions in the income distribution and on income levels.

The influence of union organization on the well-being of middle-income

workers in the United States has been well documented. Studies based on

U.S. Department of Commerce data have shown a clear link between the

growth in union density in the United States in the immediate post-war per-

iod and the growth in the living standards of middle-income families. They

also show the link between the decline in union density and the stagnation

of middle-income living standards over the past 30 years.10

In Canada, study of the long-term relationship between income and union

membership has been hampered by the fact that, prior to the 1990s, there was

no regular national survey that asked a question regarding union represen-

tation. As a consequence, it was not possible to separate employees repre-

sented by unions and employees not represented by unions in the statistics.

That changed with the addition of a question regarding union member-

ship in the Labour Force Survey in 1997. This data set does not provide the


sweep of coverage that would be needed to trace the role of union represen-

tation in the changes in income distribution for the entire postwar period.

But when it is combined with other data captured in the Survey of Labour

Income Dynamics (slId), it can support an analysis of the role of union rep-

resentation in the Canadian middle class and how that role has changed

between 1997 and 2011.

In addition, increased public access to Statistics Canada’s Longitudin-

al Administrative Database (lad) supports an analysis of the relationship

between union membership and individuals’ upward and downward rela-

tive mobility over a much longer time period.

Except where specifically noted and discussed, the data in this paper

are presented by income decile, each decile representing 10% of the group

from which the data are drawn, with the deciles organized from the lowest

income to the highest income.


Union Representation and the Distribution of Income: Aggregate Data for Individuals

All Employees

FIrst, We look at the income distribution of unionized and non-union-

ized individuals working full-time.

Figure 2 shows the distribution of full-time employees represented by a

union in 2011. Canadian workers represented by a union were more likely

to find themselves in the middle class and the upper-middle class (deciles 5

through 9). Among the top six deciles, only the richest 10% had below-aver-

age union representation — about the same as workers in decile 4.

While this pattern has generally remained consistent since 1997, the rela-

tive position of union members has moved lower in the income distribu-

tion. It is important to note that this reflects a change in relative position of

union members in the overall income distribution; it does not capture the

effect of changes in the proportion of all employees represented by a union

(commonly referred to as union density).

Between 1997 and 2011, employees represented by a union shifted down

the income distribution. In 1997, unionized employees were more likely to


be in deciles 7 through 10. By 2011, union representation in deciles 7–10 had

decreased, but it grew in deciles 1–4; it remained static in decile 5, the very

middle; and it grew in decile 6.

The data presented in Figures 2 and 3 compare distribution of union

members as a group across the distribution of income of all employees. They

essentially compare the distribution of income of union members with that

of full-time employees as a whole.

The next figure looks at the data from a slightly different perspective.

Figure 4 shows the proportion of all full-time employees represented by

a union in each income decile, comparing the data for 1997 with the data

for 2011.

On average, approximately 27% of full-time Canadian workers were repre-

sented by a union in 2011. Union density was highest within the range that

would be considered middle to upper-middle class in Canada. In the lowest

income decile, only 8% of workers were represented by a union, whereas in

the ninth income decile, 47% were represented by a union.

FIgure 2 Distribution of Full-Time Employees Represented by a Union, 2011

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%Lo

wes

t

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

ALL2011

Source Data for Figures 2 and 3 are based on annual data from Statistics Canada’s Survey of Labour Income Dynamics (SLID). In Figure 2, the income deciles are defined by the distri-bution of all full-time employees, by income. Each bar in the chart represents the proportion of full-time employees with union representation that falls into each of the decile ranges. So, for example, the bar at decile 3 shows that 10% of all employees fall into that income range, and less than 6% of employees represented by a union fall into that income range. Thus the figures compare the income distribution of full-time employees represented by a union with the income distribution of all full-time employees.


FIgure 3 Distribution of Full-Time Employees Represented by a Union, 1997 and 2011

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%Lo

wes

t

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

ALL20111997

Source Statistics Canada, SLID, 1997 and 2011. Deciles are defined by the distribution of all full-time employees; the figure shows the proportion of full-time employees represented by a union in each income decile group in 1997 compared with 2011.

FIgure 4 Proportion of Full-Time Workers Represented by a Union, by Income Decile, 1997 and 2011

0%

10%

20%

30%

40%

50%

60%

Low

est

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

Aver

age

Union Density 2011Union Density 1997

Source Statistics Canada, SLID, 1997 and 2011. Here again, the income deciles are defined by the income distribution of all full-time employees. For each decile, the chart shows the proportion of employees in the decile who were represented by a union in 1997 and in 2011 as well as the average overall union density. For example, between 1997 and 2011, overall union density among full-time employees dropped by two percentage points, from about 29% to about 27%. The bars at Decile 7 show that 42% of employees in the 7th income decile were represented by a union in 1997. By 2011, union representation in the 7th decile had dropped to 39%.


In 1997, the average proportion of full-time workers represented by a

union had been two percentage points higher, at 29%, than it was in 2011.

The figure shows clearly that the decline in union density was not uni-

form across the income distribution. The decline was highly concentrated

in the middle and upper-middle parts of the income distribution.

Private-Sector Employees

These data illustrate the interrelationship between income distribution and

union representation among all employees, and show that union-repre-

sented employees have been disappearing from the middle and upper-mid-

dle of the income range. That pattern is even more pronounced for work-

ers in the private sector.

Figure 5 shows that the proportion of all full-time workers in each in-

come decile in the private sector was roughly the same in 2011 as it had been

in 1997. It is notable that the private sector share of employees in the upper-

middle portion of the income distribution dropped between 1997 and 2011.

FIgure 5 Private-Sector Share of Employment, by Income Decile, 1997 and 2011

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Low

est

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

20111997

Source Statistics Canada, SLID, 1997 and 2011. Income deciles are defined by the distribution of all full-time employees. Each bar shows the proportion of all employees in that decile that were employed in the private sector. So compared with an average of approximately 79% of full-time employees who were employed in the private sector in 2011, over 90% of full-time employees in the bottom three deciles of the income distribution were employed in the private sector.


In general, the pattern remained similar over the period, with private-sec-

tor workers overrepresented in the bottom half of the income distribution

and underrepresented in the top half.

In contrast, the data on union representation among full-time workers

in the private sector tell a powerful story of change over the period.

Overall, private sector union density in Canada dropped from 21% to

14% between 1997 and 2011. The average, however, masks a dramatic change

within the distribution. Figure 6 shows union density among private sector

workers in the middle to the upper-middle income ranges (deciles 5 through

8) shrunk from 23%, 28%, 31%, and 41% to 14%, 22%, 19%, and 21%, re-

spectively. During a 14-year time frame, union-represented employment in

those income ranges was virtually cut in half.

Essentially, what this means is that the decline in the weight of full-time

unionized private sector workers in the middle to upper-middle income

range is associated with a dramatic reduction in well-paid, private sector,

unionized jobs, and that reduction took place over a very short span of time.

FIgure 6 Proportion of Private Sector Workers Represented by a Union, by Income Decile, 1997 and 2011

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%Lo

wes

t

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

Aver

age

20111997

Source Statistics Canada, SLID, 1997 and 2011. Income deciles are defined by the income distribution of all full-time employees. The bars show the percentage of private sector em-ployees in each decile who were represented by a union. For example, it shows that union density among private sector workers in the 7th income decile dropped from 31% in 1997 to 19% in 2011.


Aggregate Data for Economic Families

a sImIlar pattern emerges when we look at the role of union representa-

tion in the economic well-being of families. This section examines Canadian

economic families with one or more members aged 35 to 55 employed full-time.

Figure 7 shows that economic families with one or more full-time union-

ized workers are more likely to find themselves in the middle and upper-

middle income range of the overall distribution.

Unionized families are 1.75 times as likely to have incomes in the deciles

5 through 9 than in the lower first four deciles. In other words, the labour

movement continues to be the ticket into the middle class and the upper-

middle class in Canada. But the pattern changed between 1997 and 2011.

Between 1997 and 2011, the distribution of families with at least one

union-represented member shifted slightly downward in the income distri-

bution, although the overall pattern changed very little.

Figure 9 looks at the same data from a different perspective. It shows

the proportion of families with at least one member who was employed full-

time and represented by a union in each income decile for 1997 and 2011.

In 2011, 56% of families in deciles 5 through 9 included at least one union

member. That contrasts with the pattern 14 years earlier, in 1997, when 47%

of families in deciles 5 through 9 would be classified as unionized families.

Most of the decline in the share of unionized families took place in the

upper end of the income spectrum, between the sixth and ninth deciles.


FIgure 7 Distribution of Economic Families With at Least One Union-Represented Member, by Income Decile, 2011

0%

2%

4%

6%

8%

10%

12%

14%

16%Lo

wes

t

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

ALL2011

Source Statistics Canada, SLID, 2011. Income deciles are defined by the distribution, by income, of economic families in which one or more member is employed full-time. The bars superimpose the distribution of economic families in which one or more member is employed full-time and is represented by a union.

FIgure 8 Distribution of Economic Families With at Least One Union-Represented Member, by Income Decile, 1997 and 2011

0%

2%

4%

6%

8%

10%

12%

14%

16%

Low

est

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

ALL20111997

Source Statistics Canada, SLID, 1997 and 2011. Income deciles are defined by the income distribution of all economic families with at least one member employed full-time.


FIgure 9 Proportion of Economic Families With at Least One Union-Represented Member, by Income Decile, 1997 and 2011

0%

10%

20%

30%

40%

50%

60%

70%Lo

wes

t

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

Aver

age

20111997

Source Statistics Canada, SLID, 1997 and 2011. Deciles are defined by the income distribution of all economic families with at least one member employed full-time. The bars show the proportion of the families in each decile that had at least one member employed full-time and represented by a union.


Union Representation and Economic Families, Private-Sector Employees

as Was the case for individuals, the pattern was more pronounced among

families with private sector workers. The data showed a dramatic decline in

union families in the middle of the income distribution.

In 1997, 32% of Canadian families in which every member was work-

ing in the private sector, at least one of whom was represented by a union.

They tended to find themselves more in the middle and upper-middle in-

come ranges than in the lower end of the income distribution. Only 8% of

families in the lowest income decile in 1997 had a member represented by a

union, compared with between 40% and 45% in deciles 6 through 9.

By 2011, the overall percentage had dropped to 19%. As was the case

with individuals, the decline was concentrated in the middle and upper mid-

dle income range. In income deciles 5 to 9, the proportion of private sector

families with at least one full-time employee who was a member of a union

dropped from 43% in 1997 to 24% in 2011.

These data illustrate two features of changing income distribution in Can-

ada since 1997. First, they demonstrate the importance of union representa-

tion among Canada’s middle class. Second, they demonstrate that the de-


cline in union density in Canada has been concentrated among employees

in the upper half of the income distribution, and in particular among em-

ployees in the upper half of the income distribution in the private sector. To

the extent that union representation in the private sector has been a driv-

er of middle-income living standards in Canada, the strength of that driver

has declined substantially over time.

FIgure 10 Proportion of Private Sector Families with at Least one Union Member, by Income Decile, 1997 and 2011

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%Lo

wes

t

Dec

ile 2

Dec

ile 3

Dec

ile 4

Dec

ile 5

Dec

ile 6

Dec

ile 7

Dec

ile 8

Dec

ile 9

Hig

hest

Aver

age

20111997

Source Statistics Canada, SLID, 1997 and 2011. Deciles are defined by the income distribution of all families with at least one member employed full-time. The bars show, for each family income decile, the proportion of families in which all of the employed family members were employed in the private sector and at least one family member was represented by a union.


Union Representation and Economic Mobility

the prevIous sectIon looked at the impact of the decline in union density

on income distribution in the aggregate, comparing annual data from the

Survey of Labour Income Dynamics (slId).11 A second Statistics Canada

data set, the Longitudinal Administrative Databank (lad), tracks individ-

ual Canadians over time, allowing a closer look at the impact of union rep-

resentation on individuals.

The lad tracks overlapping panels of individuals over five-year periods

to evaluate changes in their economic circumstances over time. This paper

examines the following five-year periods between 1982 and 2011: 1982 to

1987, 1987 to 1992, 1992 to 1997, 1997 to 2002, and 2002 to 2007. In addition,

we look in more depth at income dynamics during two major recessionary

periods: 1989 to 1994, covering the period before and after the 1991 reces-

sion; and 2006 to 2011, covering the period before and after the Great Re-

cession of 2008–2009.

We conclude with an evaluation of the relationship between changes

in union representation status and relative income status over these five-

year periods.

Figure 11 looks at changes in individuals’ income by decile from 1982 to

1987. Overall, the results show that 69% of individuals between the ages of 25

and 54 working full-time in 1987 were within a decile of their position in the

distribution of income in 1982. This indicates considerable income stability.


In total, 17% saw their relative income drop by two deciles or more and 15%

saw their relative income increase by two deciles or more. Individuals who

were not represented by a union in either year showed roughly the same pat-

tern. But individuals who were represented by a union in both years exhib-

ited a greater degree of income stability: 80% remained within one income

decile of their 1982 income range, 10% saw their incomes decline by more

than one decile, and 10% saw their incomes increase by more than one decile.

That overall pattern of relative stability changes dramatically, however,

if union representation status changes.

Over 40% of those who were represented by a union in 1982 but not in

1987 experienced a significant decline in relative income, moving two or

more deciles down the income distribution. And over 40% of those who

were not represented by a union in 1982 but were in 1987 experienced a sig-

nificant increase in relative income, moving two or more deciles higher in

the income distribution.

The next figure shows the median change in income in each of the cat-

egories identified above.

Figure 12 shows that individuals who were represented by a union in

1982 but not in 1987 experienced a median income loss of 21%. Individuals

who were not represented by a union in either year gained 12%. Individuals

FIgure 11 Change in Income Decile Position and Change in Unionization, Individuals, 1982 and 1987

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Stays Within 1 Decile

Increase by 2 or More Deciles

Fall by 2 or More Deciles

Total Union in Year 1Then Not Union

Not UnionBoth Years

UnionBoth Years

Not Union in Year 1Then Union

Source Statistics Canada, Longitudinal Administrative Databank (LAD). The LAD tracks individuals over a five-year period, supporting an analysis of changes in income and other charac-teristics over time. In this instance, we look at union representation status and relative position in the distribution of income (income decile) over time.


represented by a union in both years experienced a gain of 5%. And indi-

viduals who went from not being unionized in 1982 to having a unionized

job in 1987 experienced a median income gain of 47%.

The pattern in these data is consistent over all of the five-year periods

studied: significant income losses were associated with a loss of union rep-

resentation; significant income gains were associated with a gain of union

representation over the period; and workers who were unionized in both

years had the greatest relative income stability.

Between 1987 and 1992, 45% of those who lost union representation

dropped two deciles or more. Overall, those who lost union representation

experienced a median income loss of 20%. Over the same period, 40% of

those who gained union representation over the period moved up two or

more income deciles. Overall, those who gained union representation ex-

perienced an income gain of 46%.


dropped two deciles. Overall, those who lost union representation experi-

enced a median income loss of 25%. The 35% who gained union represen-

tation moved up two deciles or more. Overall, those who gained union rep-

resentation experienced an income gain of 32%.

FIgure 12 Median Change in Income, Individuals, Between 1982 and 1987

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Union in Year 1Then Not Union

Not Union Both Years

UnionBoth Years


Source Statistics Canada, LAD.




experienced a median income loss of 9%. Of those who gained union rep-

resentation, 35% moved up two deciles. Overall, those who gained union

representation experienced a median income gain of 54%.



experienced a median income loss of 6%. Of those who gained union rep-

resentation, 34% moved up two deciles or more. Overall, those who gained

union representation experienced a median income gain of 44%.


Recessions, Union Status, and Income Changes

data For the two recession periods are particularly telling.

From 1989 to 1994

Figure 13 shows changes in income decile position based on changes in

union representation status for the period 1989 to 1994. A full 45% of those

who lost union representation between 1989 (the last pre-recession year)

and 1994 dropped two or more deciles, for a median income loss of 26%.

In contrast, 38% of those who weren’t unionized in 1989 but held a union-

ized position in 1994 saw their incomes increase by two or more deciles, for

a median income gain of 31%.

From 2006 to 2011

Figure 15 shows the relative impact of unionization between 2006 and 2011,

which covers the period from two years before the 2008–2009 recession and

the period two years after it.



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%





Not UnionBoth Years

UnionBoth Years




-30%

-20%

-10%

0%

10%

20%

30%

40%



UnionBoth Years




Of those who lost union representation between 2006 and 2011, 39%

dropped two or more income deciles. Of those who gained union represen-

tation, 35% moved up two or more deciles.

Figure 16 shows that those who lost union representation between 2006

and 2011 experienced a median 9% income loss while those who gained

union representation over the same period experienced a median 39% in-

come increase. The median income gain for those who were not represented

by a union in either year was 6%. The median income gain for those who

were represented by a union in both years was 10%.

Dollar numbers behind these overall percentage changes in median in-

comes highlight the impact of changes in union status on the living stan-

dards of middle-income earners.

The median income (inflation-adjusted to 2011 dollars) of individuals

whose job status went from non-union between 2006 to union-represented

in 2011 increased from $28,900 to $43,100, respectively. The corresponding

figures for individuals whose job status went from union to non-union over

the same period were $41,800 in 2006 and $36,100 in 2011.

The impact of moving from union to non-union status is particularly note-

worthy for lower-income earners. The inflation-adjusted median income of

an employee whose income was in the third decile in 2006 increased from


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%





Not UnionBoth Years

UnionBoth Years




$16,000 to $32,100, whereas for all employees with a 2006 income in the

third decile, the increase was from $15,800 to $18,900.

For an employee in the fourth decile who moved from non-union in 2006

to union in 2011, the median inflation-adjusted income increased from $22,600

to $34,900, compared with an overall increase from $22,700 to $25,600.

For an employee in the fifth decile in 2006 who moved from non-union

in 2006 to union in 2011, median inflation-adjusted income increased from

$30,000 to $34,900, compared with an overall increase from $30,100 to $32,700.

For an employee in the sixth decile in 2006 who moved from non-union


$37,500 to $44,100, compared with an overall increase from $37,700 to $39,900.

For an employee in the seventh decile in 2006 who moved from non-union


$45,900 to $51,600, compared to an overall increase from $46,100 to $48,500.

As in the other five-year periods studied, changes in union status were

associated with substantial and predictable movements up and down the

income ladder. Get a union job and you are likely to experience a substan-

tial increase in income; lose a union job and you are likely to experience a

substantial reduction in income.


-20%

-10%

0%

10%

20%

30%

40%

50%



UnionBoth Years


Total



FIgure 17 Distribution of Shifts in Income Decile Position, All Employees, 2006 and 2011

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Dec

ile 1 2 3 4 5 6 7 8 9

Dec

ile 1

0

Tota

l

(Low

est)

(Hig

hest

)


FIgure 18 Shifts in Income Decile Position, Employees Moving From Non-Union Status to Union Status, 2006 & 2011

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




Dec

ile 1 2 3 4 5 6 7 8 9

Dec

ile 1

0

Tota

l

(Low

est)

(Hig

hest

)



Even with union representation hovering in the area of approximately

30% of the workforce, changes in union status have a notable impact on the

overall distribution of employment income in Canada.

Figure 17 is very telling: it shows that only 35% of workers who were in

the lowest income decile in 2006 moved up two deciles or more by 2011. And

look at what happened to people in the deciles 5 through 8: 24% of those in

the fifth decile dropped two or more deciles, while only 16% moved up two

or more deciles. In the sixth decile, 25% dropped two or more deciles while

only 13% moved up two or more. In the seventh decile, 25% dropped two

or more deciles while only 10% moved up two or more. And in the eighth

decile, 23% dropped two or more deciles while only 6% moved up two or

more. In other words: deeply constrained upward mobility.

Figure 18 shows the same information for individuals whose union status

went from non-union to union between 2006 and 2011. Again, the general

trend is that getting a union job also means getting an income bump.


Conclusion

more than a decade and a half of excellent research in Canada has docu-

mented the growth in income inequality, the extraordinary gains of those

at the top of the income distribution relative to everyone else, and the as-

sociated squeeze on the middle class.

This paper has looked closely at the relationship between these phe-

nomena and the changes in union representation in Canada over the past

30 years. Our analysis finds that at both the individual and family level, em-

ployees represented by unions are far more likely to find themselves in the

middle and upper-middle class. Finally, the paper shows that the trends in

income inequality are associated with an overall decline in union density

in the private sector — a decline that is concentrated among employees in

the middle and upper-middle income deciles.

These results suggest that the widely reported hollowing out of the mid-

dle class in Canada is intertwined with the dramatic decline in union density

in the private sector. In graphic terms, a significant proportion of the union-

ized middle class has been carved out of the income distribution as a result

of declining union density.

While these macro-level data are highly suggestive of a relationship be-

tween changes in union representation and the distribution of income, it is

in the micro data at the individual level, which shows the impact of chan-

ges in union representation. At the individual level, moving from employ-

ment with union representation to employment without union represen-

tation is associated with a significant loss of relative and absolute income.


Moving from employment without union representation to employment

with union representation is associated with a significant gain in relative

and absolute income.

Because union density has been in steady decline in the private sector,

individuals losing union representation and experiencing income losses

will inevitably outnumber those gaining union representation and experi-

encing income gains. And this, in turn, suggests that the change in union

density in the private sector over the past 30 years is an important driver of

growing income polarization and inequality. In other words, the union card

has long been Canada’s calling card for the middle class. Without it, stabil-

ity within the middle class is greatly compromised.


Note On Data Sources

researchIng Income InequalIty in Canada has become increasingly

challenging because of the lack of data available.

Until 2011, the Survey of Labour Income Dynamics (slId) proved to be

a useful tool for inequality analysis (for the years 1997 and later) because it

combines information about income with other characteristics, most nota-

bly for this paper, union membership. However, in addition to the time-per-

iod limitation, slId is of limited value as a tool for measuring overall in-

come inequality because high-income individuals are underrepresented in

the data, and because the income measure does not capture income other

than wage and salary income.

The Canadian Income Survey (cIs), which replaced slId in 2012, uses

a different methodology for data collection. As a result, Statistics Canada

is currently recommending that income data from the cIs not be compared

with data from slId for previous years pending further research on how the

methodological change will affect the data.

Income tax data have proven a fruitful source of information about in-

comes in general, and in particular about high-income earners. All of the

information in the public domain concerning the incomes of the top 1% of

Canadian income earners is derived from income tax data. Statistics Can-

ada’s Longitudinal Administrative Database (lad), which is based in part

on income tax data, is of particular value because it includes a number of

demographic variables and permits analysis of changes at both the individ-

ual and the family level over time.


The Statistics Canada series Income in Canada tracks a number of in-

come measures, including the Gini coefficient measure of inequality, be-

ginning in 1976.

Data on union density are derived from two sources: for the period be-

fore 1997, union density data come from the filings under the Corporations

and Labour Unions Returns Act; for the period after 1997, the source is slId.

Unfortunately, only the data from slId and lad link union density with

other variables. This means that there is no direct way to measure the rela-

tionship between union membership and incomes over an extended period.

Employment income data is available from three overlapping Statistics

Canada series from 1939 to the present, collected in the Survey of Employ-

ment, Payrolls and Hours (seph) and its predecessors. However, because

these data are collected from employers, they lack the linkages to individ-

ual demographic characteristics found in other databases.

Historically, Census data have been used to highlight longer-term trends.

But with the replacement of the mandatory long-form Census by the volun-

tary National Household Survey that came into effect with the 2011 Census,

it is no longer possible to make meaningful, reliable, and up-to-date infer-

ences from Census data.


Notes

1 Saez, E. and Veall, M. “The Evolution of High Incomes in North America: Lessons From Canadian

Evidence”, The American Economic Review, June 2005 pp. 831–849. Note that the standard aggre-

gate measure of inequality for Canada, the Gini coefficient, is only available for periods after 1975.

2 Statistics Canada, cansIm Tables 326-0021, 281-0014 and 281-0006.

3 Statistics Canada, cansIm Table 380-0039.

4 Statistics Canada, cansIm Tables 326-0021, 281-0014 and 281-0006.

5 Estimated from Statistics Canada cansIm Tables 380-0016, 380-0039 and 380-0063.

6 This overall change, however, masks two significant differences. First, the data suggest that the

key driver of the current period of growth in income inequality is driven by sources of income clas-

sified as income from wages and salaries as opposed to those classified as income from capital. This

phenomenon may in part be explained by a blurring of income from employment with income from

capital in very high–income occupations (for example, income from stock options). In addition, be-

cause these data are generated from income tax returns that do not report unrealized capital gains,

they tend to understate income from capital. Second, whereas previous periods of growth in income

inequality produced a widening of gaps throughout the income range, the current period of growth is

characterized by the highest-income individuals essentially detaching themselves from the remain-

der of the income spectrum. That phenomenon is most clearly seen in two perspectives on the data.

7 Author’s calculations from Statistics Canada cansIm Table 0204-0001.

8 See, for example, the following: Jackson, A., “Up Against the Wall: The Political Economy of

the New Attack on the Canadian Labour Movement”, Just Labour, Volume 20, Summer 2013; Slan,

G. et al, “Unions Matter”, Canadian Foundation for Labour Rights, March 2013; and Jackson, A.,

“Union Communities, Healthy Communities”, The Broadbent Institute, April 2013.

9 Figure is reproduced with permission from Slan, G. et al, “Unions Matter”, Canadian Foun-

dation for Labour Rights, March 2013.

10 See, for example, “Unions, Norms and the Rise in U.S. Wage Inequality”, Bruce Western and

Jake Rosenfeld, American Sociological Review, Vol. 76, No. 4 (August 2011) pp. 513–537.

11 Statistics Canada’s longitudinal slId establishes panels of interviewees whose economic cir-

cumstances are tracked over a five-year period, covering overlapping five-year periods ending in

the years 1997 to 2010. This feature of the slId program has now been cancelled.

CCPA - Union Card - A Ticket Into Middle Class Stability

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